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NBTY: FDA probe ‘embarrassing’, but we’ve addressed issues

By Elaine Watson , 21-Jun-2011
Last updated on 21-Jun-2011 at 18:14 GMT

Supplements giant NBTY has admitted that being the subject of a Food and Drug Administration (FDA) warning letter this spring was “embarrassing”, but insists it has since addressed all of the outstanding issues raised by the regulator.

NBTY president Harvey Kamil, who was speaking to NutraIngredients-USA.com shortly after the supplements giant released its second quarter trading figures, said its New Jersey-based Nutro Laboratories division had now rectified all of the problems highlighted by the FDA.

In its April 15 warning letter, the FDA said Nutro Laboratories had not supplied documentation proving it had updated purity specifications for crospovidone, a component used in many dietary supplements, and that samples had contained too much peroxide, which can reduce the potency of finished products.

Kamil did not go into specifics, but said: “We were embarrassed [to receive the warning letter], but we have now made all of the proper corrections to our standard operating procedures to ensure that something like this doesn’t happen again. We have now addressed all of the FDA’s concerns.

“We are very concerned about making sure we adhere to GMPs and we have improved our training as a result.”

Despite this setback, NBTY was supportive of FDA efforts to police the dietary supplements industry and wanted to see Congress allocate sufficient funds to the regulator to make this possible, said Kamil.

"We would like the FDA to get enough funding so that it can monitor the entire industry properly."

Business can double in five years

NBTY, which was acquired by private equity firm The Carlyle Group last year, was confident it could double sales from $3bn to $6bn within the next five years, said Kamil.

“We are always looking at acquisition opportunities, but our organic growth prospects are also very good. We have not seen any change in consumer spending habits during the recession. If anything, consumers are buying more supplements because they are worried about healthcare costs.

"People are finally starting to recognize that prevention - in the form of supplements as well as a good diet and exercise - vs treatment, can help to save money in the long run.”

But other factors were also driving growth, from a growing body of science supporting supplements, to a gradual shift in the medical profession, which had historically regarded the industry with suspicion, but was now actively advising many patients to supplement their diets with everything from fish oils to vitamin D and CoQ10, he said.

‘Illogical’ private label bidding

Competitive pressures had dented profit margins at NBTY’s private label business, but this had been offset by gains from its branded supplements and retail operations, he said.

“Anything we lose [in private label] we are replacing with branded business.”

And while NBTY had recently lost several tenders for individual private-label contracts, it often won the business in the end, as successful bidders often proved unable to supply what retailers wanted, he said.

“In certain instances, where firms have made illogical bids, they cannot deliver, and retailers will come back to us and say they are unhappy and have changed their minds. Overall, we expect to expand our private label business aggressively.”

Q2 net sales for NBTY’s Wholesale/US Nutrition division (which supplies branded and private label products for leading retailers) dropped 5.3 percent to $404.1m, which it blamed on lower net sales of private label products, which were down $40.8m.

Net sales in the European Retail division (which includes Holland & Barrett, Julian Graves, GNC (UK), De Tuinen in Netherlands and Nature’s Way in Ireland) were up 12.6 percent to $179m.

Sales in the direct Response/E-Commerce channel were up 1.2% while North American Retail sales (Vitamin World stores in the US, Le Naturiste stores in Canada) were up 5.6 percent to $57.8m